Thanks, in large part, to the advent of business models based on digital partnerships and fractured content—from single chapters, audiobook downloads, and video to subscriptions and bundled media—the game of managing rights and royalties has grown increasingly complex—and exciting.
Today’s book publishing marketplace requires the use of equally complex software systems that can track and analyze sales and royalty data generated by millions of digital and physical products delivered instantaneously across countries, various languages, and currencies.
“Everybody is trying to figure out how to monetize whatever they have,” says George Logan, v-p of sales and marketing at Klopotek, a prominent vendor who works with 350 publishers spanning four continents. “It’s what a lot of people call chunks. It could be a paragraph; it could be a photograph; it could be a formula. People are creating components of their content below the ISBN level. And when you try to use it and repurpose it for e-books or something else, one of the complications is, somebody owns that stuff.”
Before the emergence of these business models, the book publishing game was dictated by the distribution and sales of physical copies, or single offerings with their respective ISBNs, items that could be (somewhat) easily accounted for, checked against license agreements, and parlayed into royalty payments for authors (or whoever created the content). But today’s experts on managing rights and royalties tell PW that legacy systems (software, concepts, etc.) from that era are not fit for the volumes of data and content granularity tied to the distribution and sales of digital content. What was once an obscure back-office operation is now a critically important strategic process that can save time as well as a great deal of money.
“Older royalty systems may require you to create a new contract for each product,” says Edwin Fager, president of the book publishing consultant company Kensai International. In general terms, “newer royalty software allows you to create one contract for all formats of a book—paper, hardcover, e-book, audio, chapter, anthology—i.e., one contract vs. 10 contracts.”
The common message among these software vendors is this: ledgers, spreadsheets, and manual labor are no longer viable or efficient tools for many publishers to manage rights and royalties. “There’s much more appetite for vendor-based, third-party applications,” says Kent Sahin, president and CEO of REAL Software Systems. The company’s Alliant platform—a set of applications—has been utilized by Netflix and Cengage Learning, among several other major content distributors. “Doubt is our largest competitor,” Sahim says. “For companies that have to deal with the complexities that exist, there was for a long time just flat-out doubt that you could automate something that has so many variations.”
Vendors like REAL and Klopotek tell PW that a growing number of publishers are starting to ditch archaic practices for modern software capable of tracking and synthesizing those so-called content chunks—millions and billions of them. And when publishers engage these offerings, the vendors say, they can see far more benefits, including rights exploitations; fewer errors in royalty payments; and larger revenue streams.
“Agents are getting more and more creative in terms of the contracts that they’re writing,” says Logan, whose company has implemented 150 royalty systems. “There’s a term called usage that’s come into play. If I license a photo now from Getty Images, maybe I’ve licensed it for 47 usages in some content, but the problem is there might not be a system telling me when I’ve used all of them.”
Do You Know What Rights You Own?
The Book Industry Study Group has a bevy of interesting findings in its recent research on rights management that, in many cases, precedes royalty payments.
“Basically, everything is about rights,” says David Marlin, co-chair of BISG’s Rights Committee and president of MetaComet Systems, whose Royalty Tracker and Rights Tracker are used by such publishers as Houghton Mifflin Harcourt and Pearson. “The moment [you] create a work,” he says, “copyright law says that you own it, and for anyone else to use it—unless it is work for hire—you have to license that content to them. So publishers acquire licenses from authors, and the license requires that royalties get paid. Sublicenses come into play when a publisher sublicenses those to partners who, for instance, are experts in another language. Then royalties go back to publishers, and then from publisher to author. You can have many layers.”
Speaking for BISG at its 2011 “Making Information Pay” conference, Marlin presented findings from a survey titled “The State of Current Rights Management Systems,” co-conducted by Idea Logical Company and sponsored by the Copyright Clearance Center. The survey features nine publishers and six vendors, yielding some interesting yet sobering views on rights management. Take this statement made by one vendor: “50% of all publishers—and even the big ones—don’t have a digitized contract file. They’ve got contracts filed in paper files somewhere.”
“I think the key find from the survey is the varying degrees to which companies are exploiting rights,” Marlin says. “Another big finding is that most big companies don’t have their content data digitized as structured data. They might have it scanned as a PDF, but if it is scanned as PDF, you can’t search and query it.
“We also spoke to companies that thought they were losing a tremendous amount of revenue because they couldn’t respond to rights requests promptly enough,” Marlin adds. “One company we spoke to told us that someone wanted to license some of their content, and it took them two weeks to find out if they had permission to license it.”
Echoing Marlin’s comments was Heather Reid, co-presenter of the survey and director of Data Systems & Services at the Copyright Clearance Center, whose client list includes about 7,000 publishers; the CCC offers paid subscriptions to its Rightslink suite of services and Rights-central Web site. Speaking about the survey, she says, “One of the participants, who was from a major publishing house said, ‘In the online publishing world, every transaction is a rights transaction.’ You hear a lot of this on the consumer side of the fence. You’ll hear this from libraries, for example, because, in fact, when they purchase e-content, they are not purchasing it, they are getting a license to access something online.
“It’s quite different from when you go out and physically buy the paper thing,” continues Reid. “They’re accessing it through the license that they purchase from the publisher, and the publisher is hosting the content.”
Pick a Vendor, Any Vendor
With MetaComet, Klopotek, CCC, and REAL Software Systems in the mix, there is an emerging industry of vendors offering rights and royalties management tools, and while the vendors’ sales pitches are similar (“manage fractured content better”), their approaches and models vary from slightly to distinctly different. From a publisher’s perspective, trying to pick one vendor over another can be a headache requiring serious research. Industry buzzwords abound: one vendor might offer so-called “software,” while another offers “solutions,” and another offers a multifaceted “platform” capable of ingesting complex data. Some offer both in-house implementations (storing and managing data on your servers, sometimes called ERP, or enterprise resource planning) and “software as a service” (SAAS) or “hosted solutions” (storing data in a cloud or at the vendor’s data centers), also factoring in licenses, data volumes, maintenance, and technical support. Add up everything and you have a set of tools that can cost more than $10,000—even as high as $200,000—a year.
“The biggest hindrance to small and medium publishers interested in royalty software has been its price,” says Edwin Fager, also a distributor of Jeux de Couleur’s software Easy Royalties in the United States and Canada. “Many solutions traditionally sold for $30,000 and smaller publishers could not afford it. Now vendors are targeting small to medium-size publishers with more affordable solutions. Easy Royalties is priced at a one-time fee of $500–$10,000, based on the number of titles.”
However, the higher prices, Fager and others say, typically reflect the needs of major publishing houses, those who see multimillion-dollar revenue streams from their sea of content. They can afford robust software, and they need it.
“If you happened to be a large firm, you don’t want to go with a low-cost royalty software such as Easy Royalties because it cannot scale up,” says Fager.
“There is no one best royalty solution for all firms,” he adds. “Plus, when you are buying software, you need to keep in mind: are you only looking at royalty software or will you want to add onto it later? Some companies don’t want just rights and royalties; they want to handle sales as well.”
But do all companies need modern rights and royalties management tools plus add-ons? Marlin stresses the importance of a cost-benefit analysis. “If you have 10 or so titles, does it really make sense to test new systems, or is it cheaper to buy a bookkeeper?”
Some Assembly Required
For publishers large to small who need to overhaul their rights and royalties practices but don’t need a comprehensive system, software such as Jeux de Couleur’s Easy Royalties and That’s Rights! are likely the best choice. These products offer one-time purchases that, in their basic forms, include e-mail support and minor updates, according to managing director Alex Bloom. Jeux de Couleur has only four employees and some strategic partners, like Fager of Kensai.
“There are nearly 200 That’s Rights! and Easy Royalties users in 19 different countries. We work with a wide spectrum of book publishers, from small/medium-size organizations to rights departments of some of the ‘big six,’ and with types of publishers including children’s, Christian, educational, general literature, romance, and more,” says Bloom. The company’s That’s Rights! software provides marketing support and royalty accounting for rights sellers, while its EasyRoyalties is a “low-cost, flexible, and comprehensive sales and author royalties accounting package,” according to Bloom. The latest addition to its product line is That’s Rights! Agents, which targets literary agents who need a rights and author management package.
Also in the low-maintenance rights and royalty market for publishers is Bradbury-Phillips, a London-based vendor that distributes Rights Manager, Agency-Manager, and RoyaltiesManager to more than 100 clients, including Simon and Schuster and Yale University Press. The software packages, according to co-director Alison Bradbury, are separate and used by publishers, literary agents and a mix of both, respectively. Bradbury Phillips began in 1987 and has two directors and “several colleagues” who deal with U.S., U.K., and other European clients. Any of its three packages can be licensed for a one-time fee coupled with a yearly maintenance fee, or Bradbury Phillips can host the software if a client pays a yearly fee; customer support and free upgrades are included.
“These are off the shelf, but we customize some of them, usually for the larger publishers,” says Bradbury. “All three systems are very flexible and can handle quite a lot of variations on the standard business models.”
Another low-maintenance software is RoyaltyShare, a company whose Digital Advantage for eBooks service functions as a “middleware” between retailers and a publisher’s royalty system, no matter the connecting system. Steve Grady is the company’s cofounder and president of its Technology Solutions Group.
“We help publishers specifically with processing their digital sales,” says Grady. “Many of them have 25–30 different digital retailers, and from each one of these retailers they receive sales reports. Some of them report daily (Barnes & Noble), some report monthly (Amazon and Apple). Each one of these reports is in a different format, and those formats change from time to time.”
Grady says Digital Advantage is a data cleanser that makes sure “that sales are being reported correctly, that the ISBNs that come through are accurate, that the prices being reported are accurate.”
Founded in 2005, RoyaltyShare has about 100 employees and strong roots in the music industry. Several of its executives, including Grady, came from the music subscription company eMusic. The company’s Digital Advantage software is two years old and has been licensed by 12 book publishers, the largest being the Hachette Book Group. Price points vary, but Grady says, “We charge a penny rate, so to speak. For a smaller publisher that has low volumes, they’re paying us less, and for larger publishers with higher volumes, they’re paying us more.”
End to End Solutions
With robust systems similar to MetaComet, REAL, and Klopotek, such companies as RSG Media Systems, Publishing Technology, and the Media Services Group also have the means to store, synthesize, and rigorously analyze copious data from major publishers of books, and music, television, and film companies. In more involved efforts with clients, these vendors often customize systems from the ground up. The company’s RightsLogic system has RightsIn and RightsOut modules for those dealing with rights acquisitions (mainly for republication) and rights sales, respectively. For publishers, implementing the company’s ERP or hosted solutions can cost a few thousand dollars and up. But the company is quick to point out that its fees pay for themselves. Indeed in one case, RSG discovered a publisher that overlooked a contract error worth $50,000.
“It’s more upfront work on our end, but what we find is that our customers are much more to open to having a conversation,” says Melissa Mazza, RSG’s senior director of product management.
Randy Petway, executive v-p of strategy and business development at Publishing Technology says his company’s Advance platform supports “the entire lifecycle,” covering the acquisition of rights, permissions from any contributor, including authors or agents; terms and conditions of rights and permissions; inventory of how those rights and permissions have been applied”; as well as contract management. With offices in Oxford, U.K., and Somerset, N.J., the company works with such publishers as McGraw-Hill Education and Sterling Publishing Co., owned by Barnes & Noble.
“The platform price tag can range from $8,000 to six figures, depending on the numbers of modules implemented,” Petway says. “It can be delivered as an end-to-end solution, or it can be delivered as a point solution to address a particular problem or need.”
Media Services Group has a similar approach and similar pricing, but according to Bryan Pellegrini, MSG’s v-p of sales, the company encourages end-to-end solutions. It offers the Elan Book components. “The ideal situation for a publisher is to have a single platform across their enterprise,” Pellegrini says. “If you can offer the whole package, the publisher tends to benefit more by the scale of the offering versus a single component, where they create silos of separate information.”
MSG works with such publishers as Standard Publishing, the U.S. Department of Commerce, and National Technical Information Services, which has more than four million active titles. Serving 425 publishers, it has locations in L.A.; Phoenix, Ariz.; Houston; Seattle; Stanford, Calif.; and London.
Is ‘Book Publisher’ Obsolete?
Thanks to new technologies, book publishers now offer video, audio, and other digital media that vary dramatically from print. Indeed, several of the vendors interviewed for this article were quick to emphasize that longstanding definitions of what traditional publishers do are fading in today’s content marketplace. Publishers’ business models are similar to those of magazines and music, television and film producers, says Pellegrini.
“Five to 10 years from now, you won’t be able to tell the difference— it’s just a publisher, but I’m not even sure if we’ll call it that,” he says.
Melissa Mazza offers a counterpoint. “I wouldn’t say book publishing is becoming obsolete. While the language is blurring, the technicalities are not,” she says. “If I know I’m going to sue you for copyright infringement, I know there are five extra steps I have to take for music, versus what I have to do for books, and two more things I have to do for something on television. I think... the outlets are blurring, and people are learning that the more outlets you have to offer, the longer you can keep the consumer in the store.”